Glossary Of Terms

• Administration Order

An administration order is a legal arrangement issued by a County Court, that allows you to repay only what you can afford each month. This number will be agreed to after priority expenditure such as living costs have been accounted for.

• Annual Percentage Rate (APR)

This refers to the amount of interest you can expect to pay annually. This measurement term is used for several financial products such as personal loans and credit cards.

• Bankruptcy

Put simply, bankruptcy is the state of being bankrupt. It is a legal term that is used to describe an individual or business when they are unable to repay their unsettled debts.

• Collateral

A collateral can either be a property or asset that secures a loan to offer the lender security.

• Cooling Off Period

The cooling off period is the time period of which the lender can terminate their contract without incurring any additional charges or penalties. The cooling off period usually lasts around 20 days.

• Council Tax

Council tax is a local taxation system implemented in England, Wales, and Scotland.
It refers to the tax on households, which is based on the estimated value of a property, as well as the number of people living in it.

• Creditor

A creditor is either a person or company that is owed money by an individual.

• Credit Score

A credit score is a number which can indicate how much of a risk you are to the lender. The higher your credit score, the better your score, and the less of a risk you pose for the lender.

• Credit Reference Agency

This particular type of agency holds personal information and details regarding your financial history and credit ratings. When taking out a loan or applying for a credit card, providers will approach these agencies to find out your financial history so that they can make an informed decision on whether or not they can accept you.

• Debt Collection Agency

A debt collection agency’s purpose is to pursue the debts of individuals who have failed to repay their loan.

• Debt Consolidation

Debt consolidation is a form of debt refinancing, and the process by which you downsize your debt. You take out a debt consolidation loan to pay off the others and to secure a lower overall interest rate by consolidating all debts into a single, easier, and more manageable debt.

• Debt Management Plan

A debt management plan is often abbreviated as a DMP. It is an informal consensual agreement between you and your creditor stating that you are able to pay reduced monthly repayments. This plan is not offered to everybody and will only cover non-priority debts.

• Debt-to-income Ratio

This ratio is a way that lenders measure an applicant’s capacity to manage monthly repayments and debts. It is calculated by dividing total recurring monthly repayments against their gross monthly income, expressed as a percentage.

• Early Repayment

Early repayment is also known as ‘resettlement’. This happens when you decide to repay the outstanding balance of your loan before your repayment period ends.

• Eligibility Check

An eligibility check refers to how likely you are to be accepted for a particular credit deal, taking different aspects of your credit information into consideration.

• Financial Conduct Authority

The Financial Conduct Authority, also known as the FCA, is a financial regulatory establishment in the UK that regulates the conduct of financial services organisations.

• Financial Ombudsman Service

This service is set up by parliament for the purpose of settling any disagreements or ongoing disputes between financial companies and their customers.

• Guarantor

This can be a person or organisation that provides a guaranty. In terms of loans, a guarantor acts as a back-up. If you fail to repay your guarantor loan, your guarantor will be liable, and has a responsibility to repay the debt on your behalf.

• Interest Rate

In effect, an interest rate is the cost of borrowing money. Lenders charge borrowers a fee, usually calculated on an annual basis, for the use of their money.

• Loan Agreement

A loan agreement is a contract that is signed between a lender and borrower under mutually agreed terms and conditions.

• Loan Broker

A loan broker can be either a person or company that arranges loans for individuals or organisations for a remuneration.

• Loan Calculator

A loan calculator is a helpful tool that borrowers can use to work out how much their monthly repayments will be, and how long it will take for them to pay off their debt.

• Monthly Instalments

A monthly instalment is a fixed payment amount that is sent each month by the borrower to the lender.

• Notice Of Disassociation

This refers to a request that you may file to credit reference agencies. You would request a notice of disassociation when you have had a financial affiliation with somebody, and you want to remove these financial associates from your credit file. It is common that individuals request these for mortgage contracts, bank accounts, credit cards, and loan applications.

• Payment Protection Insurance (PPI)

PPI, also known as credit insurance or loan repayment insurance, is a product that enables the borrower to insure the repayment of their loan if the borrower is unable to commit to them due to illness or unemployment.

• Repayment Period

A repayment period refers to the period of which you have to pay off your debt, that you previously agreed with your lender.

• Secured Loan

A secured loan is one that is issued and supported by an asset, such as your home. This means your lending poses less of a risk to the lender, and if you fail to repay your loan, they have the right to repossess it.

• Total Amount Repayable

This refers to the total amount of money you are expected to repay. In other words, this includes the total of all your monthly instalments, including interest and any additional charges you may have incurred.

• Unsecured Loan

An unsecured loan is one that is provided and backed only by the borrower’s creditworthiness, alternatively to their assets.

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